University of Idaho needs more students. Should it buy an online school?

Depending on who you ask, the University of Idaho’s plan to acquire the University of Phoenix, a for-profit online school, is either an attractive deal or a potential disaster.

University of Idaho President C. Scott Green said he saw the $550 million deal as a hedge against what’s known as the “demographic cliff,” an expected decline in the number of college-age students.

But there are also critics of the university’s plan, such as U.S. senators Elizabeth Warren, non-profit organizations and a trade unionhave questioned why the state’s top public university would partner with the University of Phoenix, which has historically been known for its low graduation rate prices and misleading claims, so much so that it was recently ridiculed on ‘Saturday Night Live’.

The University of Idaho is the latest federally funded public school to consider partnering with a for-profit company to develop online enrollment. Schemes at Arizona State, Purdue and, most recently, the University of Arizona have produced mixed results as higher education faces an existential crisis.

“There will be many universities that will not survive,” Mr. Green, an alumnus of the University of Idaho and Harvard Business School, said in an interview.

Mr. Green, who inherited a deficit when he became president in 2019, decided to run the university like a business. He cut spending, laid off workers and merged programs. He has also worked to attract students to the campus in Moscow, a city in a remote area of ​​the state called Palouse, distinguished by its vast rolling hills covered in wheat. He even published a book about the university’s navigation through the crisis.

College and university enrollments across the country are expected to peak next year and beyond fall abruptly as a result of lower birth rates after the economic crisis, according to research by Nathan D. Grawe, a professor at Carleton College.

The number of students enrolling in bachelor’s degrees in Idaho has increased slightly recently, to approx 7,400 last fall, an increase of 3.4 percent since 2022. But the future is bleak, especially for a state with one of the lowest percentage of students who enroll in a study immediately after high school.

Mr. Green says the University of Phoenix is ​​increasing enrollment and gain. But it also brings with it its own complicated legacy.

Founded in 1976, the University of Phoenix grew rapidly, enrolling more than 450,000 students in 2010, mostly online. It promoted its brand aggressively, even acquiring naming rights for an NFL stadium.

Because enrollment is primarily targeted at lower-income students and veterans, operations are fueled by billions of dollars in government-backed loans and grants. But along with the growth came accusations of misrepresentation. Thousands of students said they enrolled and racked up debt but never earned a degree.

In 2019, the University of Phoenix reached a $191 million federal settlement after allegations that it promoted fake deals with companies like Microsoft and Twitter from 2012 to 2016 that would help students find jobs. The Federal Trade Commission said it would reimburse the costs 147,000 students as a result of those claims.

Alphi Black, an Army veteran from Los Angeles, is trying to get her student loans forgiven after enrolling at the University of Phoenix following what she says was misleading sales pitches. After graduating in 2018, she came to view it as a disability.

Potential employers “kind of laughed about it,” she said. “They said, ‘It’s not a real school.’”

Other University of Phoenix graduates, however, say their degrees have been valuable. In December, more than 200 of them wrote a letter to Secretary of Education Miguel Cardona in support of Idaho’s takeover.

“We are often dismayed by the level of focus and vitriol directed at our alma mater. It appears that certain officials believe we should have pursued our studies at another institution,” the letter to Mr. Cardona said.

Jake Searle, a former Army pilot who lives in Kuna, Idaho, was among the graduates who signed the letter. Mr. Searle, a working father who found it difficult to attend a traditional campus, earned two University of Phoenix degrees, including an MBA in 2019.

“The University of Phoenix was the first out of the gate,” said Mr. Searle, who now works in petroleum marketing. “They were the ones who designed and developed the online platform that I would say every other program has adopted.”

The University of Phoenix has done that transformed itself, said Andrea Smiley, a spokeswoman for the school. It has closed underperforming programs and achieved higher returns graduation rates since 2016, when it was acquired for $1.1 billion by a group of investors including funds associated with Apollo Global Management. Apollo Global is led by billionaire Marc Rowan, who led the recent donor revolt at the University of Pennsylvania that resulted in the resignation of its president, M. Elizabeth Magill.

“The University of Phoenix is ​​proud of who we are today and the value we provide to our students and alumni,” Ms. Smiley said in an email, citing “improving student outcomes, positive external reviews by our accreditor, our students’ satisfaction with our career-oriented education and our fiscal health.”

Emphasizing the value With enrollment, which the university says it has intentionally shrunk to a more manageable 85,000 students, and net income of about $75 million, the University of Phoenix has been on a shopping spree.

It has not been a smooth process. Last year, the University of Arkansas Board of Governors turned down a proposal despite the chancellor’s push for a $500 million deal.

“Why would you lie down with a dog? You’re going to get fleas,” said CC Gibson III, an Arkansas attorney and former member of the university’s board of trustees, citing Phoenix’s reputational problems.

In Idaho, the plan has roiled state politics. While Gov. Brad Little has endorsed it, Raul Labrador, the state’s attorney general, is suing to block it. Mr. Labrador has questioned the secrecy surrounding the Idaho State Board of Education’s vote last year to approve the complex arrangement, which would technically take over the University of Phoenix from a newly formed nonprofit.

Members of the Idaho Legislature are challenging the deal, backed by a legal opinion from a state government attorney who says the board didn’t have the authority to approve it. The controversy was sparked then Education News from Idaho announced that the University of Idaho paid the law firm Hogan Lovells, where Mr. Green previously was chief operating officer, more than $7 million for advice on the deal.

“From what I can see, and from what I know about corporate acquisitions and restructurings, this deal carries significant risks,” said Rod Lewis, a former general counsel of a major technology company who also once headed the board that oversees at the state’s public universities. .

In a recent one op-ed Describing his reservations, Mr. Lewis asked whether the state could be on the hook for a $685 million bond issue planned to finance the deal.

There’s also a sense that the University of Idaho may be late to the party. Arizona State University and Purdue already sponsor large online programs, said Byron Jones, the former chief financial officer of the University of Phoenix.

“The online market itself is leveling off a little bit because of the saturation level,” Jones said.

At the University of Arizona, a budget crisis has raised questions about the 2020 acquisition of for-profit Ashford University. Robert Shireman, a former deputy assistant secretary at the U.S. Department of Education, points to the program, which is currently operating at a loss, as a warning sign that public universities face “myriad dangers and complications” when they partner with for-profit schools.

However, the enrollment gap has not yet disappeared.

Although Idaho is not among the states expected to be hit hardest, Green said other universities were already trying to poach its prospective students. At a recent recruiting event at an Idaho Falls high school, colleges from across Tennessee showed up, he said.

“Our competitors are already there,” Mr. Green said. “I mean, it was unbelievable. So, you know, people are going to come and get our students, because they’re going to be desperate.”